Temple and Fischer v Mazda Australia Pty Limited and AMR Motors Pty Ltd

[2017] NSWCATCD 17

Civil and Administrative Tribunal

New South Wales

Medium Neutral Citation:	Temple & Fischer v Mazda Australia Pty Limited & AMR Motors Pty Ltd [2017] NSWCATCD 17
Hearing dates:	7 September 2016, 21 November 2016 and 21 February 2017
Decision date:	22 March 2017
Jurisdiction:	Consumer and Commercial Division
Before:	John Levingston, General Member
Decision:	1 The application is dismissed. 2 No order as to costs.
Catchwords:	CONSUMER CLAIM – Motor Vehicle – diesel engine management – Fuel guide consumer option indicative only - No misleading or deceptive conduct or false representations – fit for purpose – merchantable quality
Legislation Cited:	Australian Consumer Law (NSW) Civil and Administrative Tribunal Act 2013 (NSW) Consumer Claims Act 1974 (NSW) Fair Trading Act 1987 (NSW) Judiciary Act 1903 (Cth) Motor Dealers and Repairers Act 2013 (NSW) (commenced 1/12/14) s 190 Motor Vehicle Repair Act 1980 (NSW) (repealed) Trade Practices Act 1974 (Cth)
Cases Cited:	Aceti v Burhan Pty Ltd [2015] NSWCATAP 55 Burns v Corbett [2017] NSWCA 3 Collins v Urban [2014] NSWCATAP 17 at [80] and [84] Courtney v Medtel Pty Ltd [2003] FCA 36 Evans Deakin Pty Ltd v Sebel Furniture Ltd [2003] FCA 171 Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378 Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 McEvoy v McEvoy [2012] NSWSC 1494 Minister for Immigration v Pochi (1980) 4 ALD 139 Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; 206 CLR 323 Minister for Immigration and Multicultural Affairs v Singh [2000] FCA 845; 98 FCR 469 Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 Rasell v Cavalier Marketing (Australia) Pty Ltd [1991] 2 Qd R 323 Re Minister for Immigration and Multicultural Affairs; Ex parte Durairajasingham [2000] HCA 1; 74 ALJR 405 Riana Pty Ltd v Owners of Strata Plan No 22336 [2007] NSWSC 1033 Temple v AMR Motors Pty Ltd [2016] NSWCATAP 121
Texts Cited:	G M Gregg and T D Tzovaras, "The Liability of Manufacturers and Importers under the Trade Practices Amendment Act 1978" (1979) 10 Fed LR 398 J Levingston, The Law of Tribunals, The Federation Press Sydney 2016 Trade Practices Act Review Committee, Report to Minister for Business and Consumer Affairs (August 1976) Cth Parl Deb, HR, 13 April 1978, at 1507
Category:	Principal judgment
Parties:	Barbara Temple and Thomas Fischer (applicants) Mazda Australia Pty Ltd (first respondent) AMR Motors Pty Ltd (second respondent)
Representation:	Applicants: Mr Fischer First Respondent: Mr Bradford Second Respondent: Mr Donato
File Number(s):	MV 16/28024
Publication restriction:	Nil

reasons for decision

Application

1. This is an application filed 17 February 2015 claiming alternatively rectification or repair, or a refund for the purchase price of a motor vehicle purchased for $28,000 on 15 December 2010.

Jurisdiction

2. This Tribunal has jurisdiction under the Civil and Administrative Tribunal Act 2013 (NSW) (CATA) ss 28, 29 and Schedule 4 (Consumer and Commercial Division), Part 3 (Functions of Division), cl 3 (Functions allocated to Division); which by cl 3(1) at the relevant times included: the Consumer Claims Act 1974 (NSW) (CCA); the Fair Trading Act 1987 (NSW) (FTA); the Motor Dealers Act 1974 (NSW) (MDA).

3. The Australian Consumer Law (NSW) (ACL) did not commence until 1 January 2011, and the Motor Dealers and Repairers Act 2013 (NSW) (MDARA) did not commence until 1 December 2014.

4. For reasons which are explained later this Tribunal never had jurisdiction or power under the Trade Practices Act 1974 (Cth) (TPA), but identical provisions were set out in FTA.

History of the proceedings

5. The Applicants’ original application was filed 17 February 2015, which was more than three years after they purchased the Car, in which they claim either rectification of problems they believe existed with the Car concerning increased fuel usage arising from fuel consumption surges caused by operation of the Diesel Particulate Filter (DPF), or alternatively a refund of the Purchase Price.

6. The matter was heard by Member Holles on 12 June 2015 and by a Decision and Reasons on 16 September 2015 the application was dismissed as failing to meet the civil standard of proof to establish the claim.

7. The Applicants then filed an Appeal on 7 October 2015 claiming relief by way of leave to appeal and the substantive appeal. The Appeals were heard on 11 March 2016 by Principal Member Callaghan SC and Senior Member Robertson under CATA s80(2) (Making of internal appeals), and Schedule 3 clause 12(1) concerning whether or not the appellants had suffered a substantial miscarriage of justice. The Appeal Panel granted leave on 14 June 2016 on five grounds (summarised): Mr Fischer uses two hearing aids as he has a hearing disability and was unable to hear all of the matters at the first hearing causing a disadvantage to the applicants’ case; failure of the decision to deal with a material issue, namely high diesel consumption and diesel contamination of the engine oil; determination of the dispute under the MD&RA and failure to consider the ACL; unexplained preference for the respondents’ evidence; errors in findings of fact, namely that the Car had been driven short distances and absence of evidence of any problem from the DPF warning light: see Temple v AMR Motors Pty Ltd [2016] NSWCATAP 121 (the Appeal).

8. The Appeal Panel applied the relevant principles for consideration in an appeal including: Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378 at [22]; Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 at [12] & [13]; Collins v Urban [2014] NSWCATAP 17 at [80] and [84]. The Appeal Panel granted leave; upheld the appeal; set aside the Order of Member Holles; and remitted the matter back to the Tribunal for a new hearing by a different member.

9. Relevantly, the Appeal Panel made no orders under CATA s80(3)(b) which provides:

(3) The Appeal Panel may:

…

(b) permit such fresh evidence, or evidence in addition to or in substitution for the evidence received by the Tribunal at first instance, to be given in the new hearing as it considers appropriate in the circumstances.

10. The matter then came before me for re-hearing, that is, as a fresh hearing (known as a hearing de novo), which took place on 7 September 2016, 21 November 2016 and 21 February 2017.

11. In the absence of any order of the Appeal Panel limiting the evidence at the re-hearing, and as a result of an expert witness joint session (hot tubbing) at the hearing on 7 September 2016, I directed the experts to conduct tests on the Car to determine whether it was operating within the manufacturer’s specifications. The experts were to define test parameters concerning the issues in dispute; the Car was to be made available to Mazda for testing; the experts were to identify their agreements, but if there was any disagreement the dissenting expert was to provide a report setting out the reasons why there was disagreement. This resulted in Mr Bradford preparing the Vehicle Investigation Report of 16 November 2016: exhibit 2. Mr Alessi for the applicants apparently disagreed with some of the test procedures, but did not provide a report explaining why he disagreed.

12. Finally, I respectfully refer to the Appeal Panel’s decision which suggested that the Applicants may have a remedy under the Trade Practices Act 1974 (Cth) (TPA). There is no jurisdiction or power in this Tribunal, either in its own right or by the transitional provisions from the previous Consumer Trader and Tenancy Tribunal (CTTT) to exercise jurisdiction or make orders under the TPA which is a Commonwealth Act. This is a matter I discussed in The Law of Tribunals, The Federation Press Sydney 2016 at [A.1.1.1], [A.1.2] and [A.1.2.2]. In short, this Tribunal is not a Court for the purposes of the Commonwealth Constitution s77(iii) or the Judiciary Act 1903 (Cth) s64; and see Burns v Corbett [2017] NSWCA 3. The relevant provisions of TPA are also found in the FTA which was in force on the dates on which the Applicants’ causes of action arose.

Contentions

13. The Applicants contend that Mazda relevantly knew and had an obligation to disclose the following facts to them (described by the Applicants as “design faults”), which it did not do:

1. Regeneration causes fuel use surges resulting in increased fuel consumption. Mr Fischer explained the complaint about fuel surges, as follows:

The average fuel economy can be displayed in the car and the distance travelled in a trip can also be displayed. So if after driving 300 kms the average fuel economy is 6.6 L/100kms and in another 70 kms the fuel economy jumps to 8.4 L/100kms, what has happened in those 70 kms. The fuel economy for those 70 kms can be calculated thus:

300 x 6.6 + f x 70 = 370 x 8.4

f = 370 x 8.4 – 300 x 6.6

70

= 3108 – 1980 / 70

= 1128 / 70

= 16.11 L/100kms

This fuel economy surge is unacceptable and Mazda has done their best to hide that it occurs.

(emphasis added)

14. This latter allegation “Mazda has done their best to hide that it occurs” also raises other causes of action, namely whether or not Mazda has engaged in conduct that is or is likely to be misleading or deceptive, or made a false representation;

1. The Applicants complain that because there is no indication of the Regeneration occurring, if the engine is turned off during the Regeneration cycle, it is later reactivated but takes longer to complete Regeneration, and uses additional fuel. There is also an associated issue as the Applicants contend that there is no indication (and as a result they do not know) whether or not the DPF warning light is or is not functioning properly;

2. The fuel economy figures cannot be achieved;

3. Diesel in the oil increases wear in the engine components, and eventually, catastrophic engine failure.

15. In the alternative, the Applicants contend that if Regeneration is a normal process, it still has several consequences which are not beneficial to them:

1. Requires frequent oil level checks which is a lengthy process if Mazda’s recommendations are followed;

2. More frequent oil changes are required by comparison to a different system, which costs about $200 each time;

3. Oil changes are not synchronised with the servicing schedule;

4. Diesel mixing with the oil will mask an oil leak;

5. The dipstick measure shows an increase in volume in the sump over time, but the owner’s manual does not explain this incident.

16. The Applicants do not expressly say (but I infer from their contentions and their claim for a refund of the purchase price) that they would not have bought the Car if they had known about the matters of which they now complain.

17. In answer, Mazda contends:

1. The Application is brought out of time;

and in the alternative:

2. Regeneration is used in the Mazda 3 in common with many diesel engines and the increased fuel consumption (the fuel surge) is a temporary event which occurs only during Regeneration;

3. A design feature of the normal engine operation and management is for diesel to mix with the oil and accumulate in the sump, resulting in “engine oil dilution”;

4. The DPF warning light on the dashboard will illuminate if the amount of mixed oil and diesel exceeds predetermined levels, which did not occur;

5. The published fuel economy figures are for the purpose of comparison between different cars and not achievable in everyday driving;

6. There is no evidence of premature engine wear or impending engine failure.

Facts

18. The material facts are set out in the following paragraphs. A decision maker must consider and find all the material or relevant facts on which the determination is made: McEvoy v McEvoy [2012] NSWSC 1494; see also Minister for Immigration v Pochi (1980) 4 ALD 139 at 159-160. Relevant or material facts are the facts essential to making the determination and which are the facts on which the decision maker based its decision: Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; 206 CLR 323 at 346 [136]. The test of materiality was discussed in Minister for Immigration and Multicultural Affairs v Singh [2000] FCA 845; 98 FCR 469 at 482 [56]-[57]; approved in Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; 206 CLR 323 at 346 [137]; but does not require “that all pieces of conflicting evidence relating to a material fact be dealt with … A fact is material if the decision in the practical circumstances of the particular case turns upon whether that fact exists.” This process involves identification of the factual elements in the relevant section of the statute which the applicant must prove to obtain a determination, including facts that are not controversial.

19. Where there is a dispute the decision maker determines the disputed facts on the balance of probabilities, and the process involves weighing the evidence, and drawing conclusions or inferences: Ansett Transport Industries (Operations) Pty Ltd v Taylor (1987) 18 FCR 498. The reasons are not required to deal with or dispose of every fact that was not material to the determination: Re Minister for Immigration and Multicultural Affairs; Ex parte Durairajasingham [2000] HCA 1; 74 ALJR 405 at 417-418 per McHugh J. Whenever possible the reasons should also include references to the sources of the relevant evidence, usually in the exhibits or given in oral evidence: Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; 206 CLR 323. This level of detail is not always possible or practical in this Tribunal which has an element of informality with a guiding principle of “just, quick and cheap”: CATA s 36 (Guiding principle to be applied to practice and procedure); as there is more often than not, insufficient time to permit this, and although there is a sound recording of the proceedings there is no transcript to include a reference to the oral evidence of a witness.

20. Ms Temple and Mr Fischer (the Applicants) are consumers and wished to purchase a motor vehicle for their private use, and in any case the purchase price was less than $40,000.

21. Mazda Australia Pty Limited (Mazda) carries on business in trade and commerce and is the importer of motor vehicles manufactured overseas, and is deemed to be the manufacturer under the FTA, as discussed later.

22. AMR Motors Pty Ltd (AMR) is a licensed motor dealer in NSW and carries on business in trade and commerce as a motor dealer and supplies (by way of sale) motor vehicles to the public, and also carries out motor vehicle servicing.

23. By an Australian Government Initiative, a Green Vehicle Guide (the Fuel Guide) requires all light vehicles to display a Fuel Consumption Label on the front windscreen: exhibit E. The Fuel Guide relevantly states:

The label indicates the vehicle’s fuel consumption in litres of fuel per 100 kilometres (L/100km)…The results are based on a standard test procedure so consumers can reliably compare the performance of different models under the same test conditions.

… However, while the label enables you to compare vehicles with confidence, no single test can simulate all ‘real world’ driving conditions. Actual on-road fuel consumption will depend on factors such as traffic conditions, vehicle condition and load, and how you drive.

…

The label displays three fuel consumption numbers – ‘combined’, ‘urban’ and ‘extra-urban’…The label highlights the higher fuel consumption of many vehicles operating in urban conditions…Data from the UK indicates that that urban fuel consumption values can be 20-50% higher than the combined value. While the ‘extra-urban’ component is not a traditional ‘highway cycle’, it is a high speed test that may provide a better indication of freeway or highway driving. Of course, as noted above, no test can simulate all ‘real world’ conditions and the primary aim of the new label is still to provide a common basis for comparison of individual vehicle models.

…

The test standard for the current fuel consumption label is specified in ADR 81/02 Fuel Consumption Labelling for Light Vehicles…The label displays the fuel consumption…for the vehicle obtained from a standard dynamometer test conducted under laboratory conditions. This test is specified in United Nations (UN) Regulations which set out the procedures for determining fuel consumption…

…

Motor vehicles have much higher fuel consumption on the ‘urban’ part of the test cycle, which features a low average speed (19 km/h), substantial idle periods (30%) and frequent stop/start events. For drivers who spend a lot of time in city traffic conditions, this number will provide a more accurate indication of fuel consumption than the combined result. In contrast, the ‘extra-urban’ component has a relatively high average speed (63 km/h) and a peak speed of 120 km/h. It is not a typical ‘highway’ cycle as it does not maintain a relatively constant speed over an extended period of time, but it is more likely to approximate fuel consumption in freeway or highway driving.

(emphasis added)

24. The results for the Mazda 3 Diesel; exhibit E at p3; shows the following fuel consumption (L/100km) as follows:

Combined:    5.7

Urban:      7

Extra-urban   5

25. On or about 15 December 2010 the applicants and AMR made an agreement for the supply of a Mazda 3 Diesel passenger motor vehicle NSW registration number BIO4MN and VIN JMOBL10C100198564 (the Car) for the sum of $28,000.00: exhibit 1 p1 & 2. The Car was first registered on that date, and sold with the Mazda new car warranty which expired 15 December 2013: exhibit A pp1 to 4.

26. The Car has a diesel engine designed to meet legislated pollution standards by a methodology described as “Regeneration” which is managed by an engine management system. This involves a Diesel Particulate Filter (DFP) located in the exhaust system to capture small soot particles which are a residue from the diesel ignition, and are then burnt off in the Regeneration process when they reach a pre-determined level. The DPF has sensors which activate the Regeneration process. The system operates by putting diesel into the exhaust on the exhaust stroke to clean the DPF and this causes an increase in diesel fuel consumption. There is no driver information provided on the dashboard to indicate when this process occurs. Prior to environmental legislation the soot was discharged unburnt through the exhaust system and a feature of previous diesel engine operation was a visible black cloud of soot from the exhaust pipe during engine operation.

27. The engine has an oil sump which holds oil and also collects unused diesel which has not been used up in the engine ignition process. Describing the process in a non-technical way:

1. Oil circulates around the engine from the sump and returns to the sump, and as it circulates it lubricates the moving parts to reduce wear. This includes lubrication of the pistons and piston rings as they move up and down in the cylinders. The oil also passes through an oil filter which removes particles accumulating in the oil;

2. Diesel fuel is injected into each engine cylinder and unused diesel comes past the engine piston rings and collects in the oil sump where it mixes with the oil.

28. The engine also has a dipstick for measuring the quantity of fluid (oil and diesel) in the oil sump. The dip stick has three marks which indicate the quantity of fluid: ‘L’; ‘F’; and ‘X’: see exhibit 1 pp57 and 58. The volume in the sump increases as diesel accumulates, and this is indicated by the dip stick measures. The distance between the markings is a defined measure which shows the volume in the sump.

29. A feature of the Regeneration is that it uses more diesel fuel during the process, which the Applicants described as a “fuel surge”.

30. The parties agree that diesel mixes with oil during Regeneration: exhibit A p3.

31. The Applicants complain that they were never advised of the Regeneration process before they made the agreement to purchase the Car, or after they made the purchase as it is not mentioned in the Car owner’s manual and never mentioned by AMR or other Mazda servicing providers.

28. On 1 January 2011 the ACL commenced.

29. On 5 January 2011 the Car was serviced at 1,000 km by AMR and no relevant issues were raised, exhibit 1, p1.

30. On 1 July 2011 AMR carried out a 10,000 kms service: exhibit 1 p3. The Car had done 7274 kms. The Applicants queried whether or not the fuel consumption display was accurate, and were given unspecified advice.

31. On 20 April 2012 the Applicants took the Car to John Newell Mazda at 22,675 kms: exhibit 1 pp4 and 5; concerning excessive fuel consumption of 5.7 L per 100km. The tax invoice records the results of investigation as:

found oil level too high, also suspect wrong oil was us (sic) at last service.

and the oil and filter were changed.

36. On 31 January 2013 the Applicants had the Car serviced by GIL Auto Maintenance & Service at Bondi Junction (GIL Auto), see exhibit B. The odometer showed 30,581 kms and the engine oil and filter and fuel filter were removed and replaced. There is no reference to fuel consumption.

37. On 9 July 2013 the Applicants again had the Car serviced by GIL Auto, see exhibit B. The odometer showed 35,215 kms and the engine oil and filter were removed and replaced. There is no reference to fuel consumption.

38. On 14 December 2013 the new car warranty expired.

39. On 31 January 2014 AMR completed a 60,000 kms Service at a cost of $390.00: exhibit A pp 6 to 8. The Car had done 43,767 kms. The Applicants had requested AMR to check high fuel consumption. The tax invoice records the following results:

Checked and couldn’t fault checked for codes no codes were found Reset cam tested ok Air filter was dirty replaced in service Being dirty can contribute to bad fuel consumption C/o fuel average data re set city driving will consume more fuel

40. On 1 August 2014 AMR completed a 70,000 kms Service: exhibit A p9 to 11. The Car had done 52,267 kms. The Applicants again raised the fuel consumption issue which was investigated by AMR, as follows:

Concern of high fuel consumption reported. Check for possible causes. Check long and short term fuel trim. reading jumped 7.6 L to 9.2 L within 20 Km’s Checked with MMDS No fault evident no fault codes no Later PCM updates all ok

41. On 1 December 2014 the MDA was repealed and the Motor Dealers and Repairers Act 2013 (MDARA) commenced, see s 190 (other than for Part 6 which commenced later but is not relevant here).

42. On 24 December 2014 at 57,529 kms the Applicants again took the Car to AMR for investigation of the fuel consumption, exhibit A p12:

Concern of high fuel consumption reported. Check for possible causes. Check long and short fuel trim. Vehicle averaging 16 L/100kms. Engine oil has risen. Please check soot level in DPF

Checked LTFT and STFT, Carried out oil change and Reset of Oil Level carrier out. Checked and cleared codes all ok.

and AMR claimed no charges for this investigation although the Car was now outside warranty. The work was done as a goodwill gesture, and is not to be taken as an admission of liability.

43. On or about 3 February 2015 the Applicants noticed that the oil level had risen to about halfway between the dipstick X and F indicators, indicating diesel accumulating in the oil sump.

44. On 3 February 2015 the Applicants took the Car to AMR for investigation. Mr Fischer delivered a note to the AMR Service Manager with the Car: exhibit A p13; relevantly stating:

…

After driving about 1500 (?) kms the oil level has risen to halfway between the full level and the “X” level.

In that time the fuel economy rose from 6.6 L/100km to 8.6 L/100km when the driving conditions were the same (in about 70 km’s of driving). It then fell to 7.6 L/100km and then jumped to 8.0 L/100km.

Do you know what could have caused this. Could it be anything to do with the D.P.F.

The indicator light showing a problem with the DPF has never illuminated. Could you check that it is functioning properly

…

45. On 3 February 2015 AMR carried out an investigation and the following information is recorded on the tax invoice, exhibit A p14:

Concern of high fuel consumption reported. Check for possible causes. Check long & short term fuel trim. DPF has been cleaned and forced int (sic ) regeneration on 24/12/2014. Fule (sic) consumption improved to 6 L/100 and now has returned to high level on 12 L/100. Please refer to Phillip Donato as no diagnostic fee is to be charged as per DP. Repairs found will be chargeable.

Suspect DPF fiter (sic) to be partially blocked. On car forced DPF regeneration carried out on 24/12/2014 @ 57529km with DPF treatment to unblock DPF filter. Client has noticed improvement from that period moving forward.

Carried out data investigation and vehicle has not been into regeneration since last forced regeneration. Audible note of regurrgitaion (sic) evident of possible blocked exhaust system. Recommend removal of DPF filter and forced back flushing to remove any contaminants due to lack of DPF regeneration cycles as per recommended maintenance for DPF equipped vehicle,

46. The Applicants also had the oil sample taken from the Car analysed by Castrol Labcheck which by their Analysis Report dated 3 February 2016 relevantly stated:

DIAGNOSIS

No oil hrs/kms or previous sample history make accurate difficult. Some fuel present in sample 2% which is acceptable for this model, all other test results appear acceptable.

(emphasis added)

47. By a letter of 13 February 2015 Ms Temple wrote to Mr Luigi Bonnano about the Car: exhibit A pp15 to 17, which brought a response from AMR in an undated letter posted 14 February 2015 setting out exchanges between the parties (exhibit A p 18 to 20) and attaching three undated letters from Mr Crawshaw of Mazda which relevantly discussed the issues as follows:

(longer letter, exhibit A p21, believed to be 14 February 2015)

Thank you for contacting Mazda Australia regarding your concerns with the oil level on your Mazda3 diesel. We understand that you are also requesting information on the operation of the Diesel Particulate Filter system on your vehicle.

With regards to your concerns with oil dilution on this vehicle, the Mazda 3 Diesel vehicle employs a Diesel Particulate Filter (DPF) which is incorporated into the exhaust system. The DPF is designed to accumulate particulate matter to ensure Mazda vehicles comply with Australian emission standards and ultimately provide a clean burning vehicle. The state of the DPF is closely monitored by the Engine Management system and regeneration (burn off) takes place within the DPF to ensure all particulate matter is burnt from the DPF. As the burn off process is controlled by the Engine Management system, the required regeneration leads to fuel dilution; this means the oil level increases over time.

Mazda Engineers have designed the engine oil dipstick with an X mark on it, once the oil level has reached the X mark on the dipstick, the engine oil requires replacement. Please note the rate of oil dilution may vary depending on factors such as driving techniques, driving conditions, frequency of regenerations (burn off) etc... The replacement of engine oil may be required even before the scheduled service is due as stated in the owner's manual. Please refer to the Owner Maintenance section in your owner's manual (chapter 8, p7) for important information on the requirement of periodic inspections of the engine oil in your vehicle. Please note that during a periodic inspection should the oil level be close to or exceed the 'X' mark on your dipstick, it is important you take your vehicle to a Mazda Dealer for inspection and diagnosis of the situation.

The DPF system also consists of an indicator light which illuminates when particulate matter accumulates and the amount collected cannot be removed automatically, it also illuminates when the engine oil replacement period is reached due to oil deterioration. For further information on the operation of the DPF indicator light, please refer to the Diesel Particulate Filter section in your owner's manual (chapter 5, p31)

(shorter letter, exhibit A p22)

Once again we thank you for contacting Mazda Australia concerning the DPF system on your Mazda 3 Diesel vehicle.

During our conversation, you have requested specific values that will activate a DPF warning light. The warning light will alert the driver to an automatic burn off procedure of the particulate matter.

The warning light will illuminate should the particulate matter reach a value of 80%. As stated in the owner's manual, a driving condition of 2000 RPM or more, with a speed of 40 Kilometres or more will need to be reached to assist with the DPF burn off, for a period of 10 to 15 minutes.

It also states in the owner's manual, when the DPF warning light is flashing, the vehicle is required to be presented to an expert repairer.

48. By an undated letter to Mr Crawshaw, Mr Fischer asked a series of questions about the DPF warning light operation and refers to fuel consumption having risen from 6.6 L/100kms to 8.4 L/100kms in about 70 kms of driving, and asked whether this was related to the DPF, exhibit A p23.

49. Mr Crawshaw answered by an undated letter (the third letter attached to the earlier AMR letter, exhibit A p24. Relevantly, this third letter states:

Please find our responses below to your further questions regarding your Mazda3 Diesel vehicle.

1. As we have advised in previous letters, the warning light will illuminate should the particulate matter reach a value of 80%.

2. Once this occurs, your vehicle will perform an automatic burn off procedure, which is quite normal and not due to any concern with your vehicle.

3. If your DPF light has never illuminated whilst driving, then it is most likely because the particulate matter has not reached 80%. It is possible the DPF light may have illuminated whilst driving and you may not have noticed it.

…

6.    As the DPF burn off process is controlled by the Engine Management system, the required regeneration leads to fuel dilution; this means the oil level increases over time. Please note the rate of oil dilution may vary depending on factors such as driving techniques, driving conditions, frequency of regenerations (burn off) etc. This is quite normal and no cause for concern.

7.    There is no option to alter the settings of the DPF system, so the indicator light will illuminate at a lower percentage.

8.    Fuel consumption can be more influenced by many factors such as weight in the vehicle, use of air conditioning, road conditions, etc., rather than the operation of the DPF system.

50. On 20 February 2015 the Applicants took the Car to Midas Car Centre at Woollahra (Midas) for change of oil and oil filter at 60,296 kms at a cost of $150: exhibit A p8.

51. On 13 May 2015 the Car was tested by John Newell Mazda: exhibit 1 p31; for excessive fuel consumption. The outcome is recorded as follow:

Collected data with MMDS.

Checked air filter.

Removed all injectors and sublet for testing.

Refitted injectors reset injector valves.

Test drive vehicle for extended period to perform fuel consumption testing.

Fuel consumption within specs.

52. On 28 May 2015 the fuel injectors were checked by AG Diesel Pumps and Injectors Pty Ltd who by a report of that date advised that “All injectors performing to specifications” exhibit 1 p33.

53. On 29 May 2015 Mazda retrieved data from the car’s on board modules which shows that the Car had done 63,285 km, and “No concern’s (sic) found or recorded with the vehicle…”. The attached report showed that all engine functions were within specifications, and relevantly that Regeneration had occurred at 253.68km previously: exhibit 1 pp35 and 35. A further technical report dated 29 May 2015 states:

…it is considered part of normal operation that the engine oil would rise over time. This occurs as a result of Regeneration (removal of accumulated Particulate matter) from the Diesel Particulate Filter (DPF).

Additional fuel is injected to support the Regeneration of the DPF; a small percentage of this additional fuel is accumulated and mixed in the engine oil. The engine control system monitors the amount of accumulated fuel within the engine oil and notifies the Driver via the illumination of the Engine Warning light if this amount exceeds predetermined levels.

54. On 17 June 2015 the Applicants again took the Car to Midas for change of oil and oil filter at 63,561 kms and a further cost of $150: exhibit A p9.

55. On 12 October 2015 the Applicants took the Car to Automotive Hospital at Haberfield for change of oil and oil filter at 67,687 kms. A sample of the old oil was taken for analysis. This cost the Applicants $241.25: exhibit A p10.

56. Mr Fischer also raised with Mazda the issue of the DPF operation in the context of a publicised problem with the DPF in the Mazda CX-5 engine. By letter of 28 October 2015 Mr Spiliotis replied for Mazda stating that the CX-5 used a different engine and the problem concerned a programming adjustment with the Power Control Module and positioning of the oil level gauge. He advised that no such issue had been identified in the Mazda 3 diesel engine. See exhibit A p25.

57. Mr Fischer then attempted to engage Mr Spiliotis with further queries but received no response.

The expert reports

58. Experts were engaged by both sides and produced reports. Before discussing the reports I identify the principles for evaluating the weight or value of expert reports where there were differences of opinion.

59. One of the dilemmas for a Tribunal is how to resolve differences of opinion between experts as the Tribunal is not bound by judicial decisions on expert evidence governed by the rules of evidence: Riana Pty Ltd v Owners of Strata Plan No 22336 [2007] NSWSC 1033 holding that Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 at [85] per Heydon JA (as he then was) did not apply to proceedings in the CTTT which was the predecessor to this Tribunal.

60. Although the rules of evidence do not apply, the Tribunal must use some coherent principle in considering expert evidence and evaluating what weight is to be given to it. In this regard, the question of expert evidence was discussed in Evans Deakin Pty Ltd v Sebel Furniture Ltd [2003] FCA 171 at [669] ff per Allsop J (as he then was):

The question of expert evidence

669. Judicial focus has, in recent times, been given to the question of admissibility of expert evidence: Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705, 729-50 (per Heydon JA); HG v The Queen (1999) 197 CLR 414, 427 (per Gleeson CJ); Velevski v The Queen (2002) 187 ALR 233, 252-53 (per Gaudron J) and 267-69 (per Gummow and Callinan JJ); Ocean Marine Mutual Insurance Association (Europe) OV v Jetopay Pty Ltd [2000] FCA 1463 (Full Court); and Quick v Stoland Pty Ltd (1998) 87 FCR 371 (Full Court).

670. Central to the orderly and admissible presentation of any expert evidence is the clear identification of the opinions that the expert seeks to present. This is a separate question from whether, for the opinions of the expert to be admissible, the basis of the opinions on the assumed facts must be set out, about which there may be different views expressed in Makita and Quick v Stoland. I think, however, any such difference is unlikely, in most cases, to be of significance in the light, in particular, of s 135 of the Evidence Act and its likely application to disembodied and unsubstantiated expressions of opinion, a matter to which reference was made in Quick v Stoland. If I may say so, without intending to put to one side the comprehensive reasons of Heydon JA in Makita, or the careful reasons of the Judges in Quick v Stoland, in this case, I particularly bear in mind what Gleeson CJ said in HG v The Queen, supra at 727:

The opinions of Mr McCombie were never expressed in admissible form. An expert whose opinion is sought to be tendered should differentiate between the assumed facts upon which the opinion is based, and the opinion in question …

(emphasis added).

61. There are various practical solutions, including the procedure by which the opposing party experts are required to confer in a joint meeting to resolve any differences between them (as set out in UCPR r31.24 which applies to Court proceedings), and if there remain differences after such a joint meeting, requiring the experts to write a report in which they identify areas of dispute and more importantly, give reasons to explain their differences of opinion.

62. No interlocutory orders had been made in this matter to deal with the differences between the experts, and the Tribunal attempted to resolve this by having the experts give joint evidence in a so called “hot tub” process, which identified a difference of opinion about a testing methodology. As I result I made directions about the respective experts identifying an agreed test protocol.

63. The Applicants engaged Mr Renzo Alessi, Mechanical Engineer to inspect and report on their issues of concern. Mr Alessi acknowledged and adopted the UCPR Schedule 7 Expert Code of Conduct (Rule 31.23) which is in similar terms to the Tribunal Guidelines for expert witnesses. I am satisfied that his Curriculum Vitae identifies education and experience from 1984 to date which qualifies him to make an expert report, exhibit A pp 46 to 52.

64. Mr Alessi prepared a first report of 7 April 2015 (the Alessi First Report), exhibit A pp 40 to 55) which addressed the issues of high fuel consumption, contamination of engine oil with diesel, and the need for a number of Particulate Filter Regenerations. The Alessi First Report sets out test methodology and opinions as follows:

DIAGNOSTIC SCAN TEST

10.    Our first point of reference was to test for electronic faults or failures by conducting a diagnostic scan test of the Subject Vehicle.

11.    The diagnostic test was conducted with Mr Fischer present and the Subject Vehicle did not present any obvious faults within the system which we believe was related to high fuel consumption and excessive diesel in the engine oil.

12.    No diagnostic codes were present to disclose.

(emphasis added)

FUEL PRESSURE TESTS

13.   …fuel pressure tests and a leak down test was conducted over night.

14.    The fuel system was tested for leak down of the fuel rail and pump while the Subject Vehicle was permitted to remain stationary over night with the return system isolated.

15.    Over a period of approximately 14 hours, the fuel system had bled dry. With the fuel system isolated the only path for fuel deposit was the combustion chamber or directly into the oil system.

16.    The loss of fuel pressure is consistent with fuel entering into the combustion chambers and dispersing into the engine oil over night. Alternatively, it is also consistent with fuel pump leakage directly into the engine oil.

17. Needless to say, the fuel system may be experiencing some leakage whilst it is in operation; further adding to the dilution of the engine oil with diesel fuel.

65. The cause of loss of fuel pressure was inconclusive other than to identify two possible causes in [16] resulting in diesel in the oil. Mazda’s evidence is that the presence of diesel in the oil is a designed feature for engine management with the DPF and Regeneration. In my opinion paragraphs [13] to [17] do not identify a design fault with the Car.

66. The Alessi First Report continued and found the diesel fuel system was operating to the manufacturer’s specifications. There were no faults identified:

CONCLUSION

22.   As instructed we attended Automotive Hospital …to examine the Subject Vehicle … to determine if the diesel fuel system was operating as per manufacturers specifications.

23.    An in depth diagnostic scan test in the presence of Mr Fischer did not reveal any electronic faults with the Subject Vehicle.

(emphasis added)

67. The high fuel consumption issue was again identified as having two possible causes at [24] and this was opined to be consistent with a number of possibilities at [25]:

24.   Fuel pressure and leak down tests conducted on the Subject Vehicle suggest that the fuel system is suffering from fuel injector or fuel pump leak down.

25. The fuel leak down is consistent with the faults I problems which Mr Fischer has brought to the attention of Mazda … in regards to excessive oil incrimination; excessive DPF clogging and regeneration requirements and high fuel consumption.

68. However, the conclusion in [25] is not based on any identified testing but is based on assumptions (which were not more than matters which the Applicant’s complained of) which have not been established as fact: excessive oil incrimination, excessive DPF clogging and Regeneration. In addition, the testing of engine elements by the Mazda servicing agents (see the material facts) had not identified any faults.

69. The Alessi First Report then goes on in [26] and [28] to express opinions based on these unestablished assumption, and relevantly, there is no explained basis for the opinion of “the likelihood or high probability of premature DPF and engine failure is eminent (sic):

26.    Our concern with excessive engine oil incrimination due to the ingress of diesel into the oil system is the increased risk of engine oil dilution and the likelihood or high probability of premature DPF and engine failure is eminent (sic) if same continues to occur.

…

28.    After careful inspection, testing and evaluation of the Subject Vehicle, we advise that the faults named above in regards to excessive oil incrimination; excessive DPF clogging and regeneration requirements and high fuel consumption, will need addressing to eliminate the risk of premature failure of the components and the engine.

70. There is no factual basis for the conclusion in [28] that there is a risk of premature failure of the components and the engine. In any case, this is raised as a matter requiring elimination by investigation (“addressing”). Relevantly, there has been no investigation or inspection of the engine to establish whether or not there is any abnormal wear in the engine, being a relevant fact on which to base an allegation of premature failure of the components and the engine.

71. Mr Alessi prepared a second report of 10 June 2015 (the Alessi Second Report), exhibit A pp 56 to 59 which was concerned with a review of information provided by Mazda to establish if the testing conducted by Mazda or their expert was adequate to diagnose the faults which were responsible for excessive oil rise and poor fuel economy. The Alessi Second Report opines:

6.    Within the Mazda documentation notation of a fuel economy test was included; which suggests that the subject vehicle's tank was filled and was then driven for a distance of 86.4 kilometres. At the conclusion of such road test the tank was refilled with 5.85 litres of fuel to calculate the economy.

7.    A fuel economy test conducted in such a manner is very inaccurate as the slightest gradient within the area of refilling can alter the economy reading dramatically; especially when so little fuel was replenished.

72. The Alessi Second Report does not by the above paragraphs, identify or propose a more accurate fuel test. In addition, the Applicants did not carry out any preferred method of testing to overcome the deficiency criticized by Mr Alessi. Nevertheless, fuel consumption testing was carried out by Mazda and is the subject of a report which is discussed later in these reasons.

73. The Alessi Second Report continues:

9.    Mazda state within the owner's manual that there will be some increase in the level of oil within the engine sump and allow same with a dipstick marked with L for LOW and X for EXCESSIVE.

10.    Mazda Australia provides a service and warranty booklet which stipulates a service interval of 1O,OOOkm or 6 months - whichever comes first, but state that depending on driving conditions; at times it may be necessary to change the oil earlier than recommended within the service book due to oil rise.

11.    If oil rise occurred every 9000km or every 6 months, that may be viewed as somewhat acceptable. However, the subject vehicle is experiencing oil rise every 2500 - 3000km or 2.5 - 3 months.

74. The facts on which the opinion in [11] is based, namely an oil rise every 2500 to 3000 km are not identified in the Alessi Second Report. However, the Service records in evidence do not provide a factual basis for Mr Alessi’s assumption of 2500 to 3000 km, as summarized below:

Date	Kms	Issue identified	Outcome
1/7/11	10,000	fuel consumption	no evidence
20/4/12	not stated	5.7 L/100kms	no evidence
31/1/13	30,581	no complaint	-
9/7/13	35,215	no complaint	-
31/1/14	43,767	high fuel consumption	no evidence
1/8/14	52,267	7.6 L/100kms to 9.2 L/100kms within 20 kms	no fault identified
24/12/14	57,529	Applicants observed 16 L/100kms – engine oil risen half way between X and F Advised AMR fuel consumption of 6.6 L/100kms to 8.6 L/100kms over 70 kms, then fell to 7.6 L/100kms then up to 8.0 L/100kms	AMR does forced DPF Regeneration
13/5/15	63,285	CHECK AND ATTEND TO ENGINE USING EXCESSIVE FUEL	Fuel consumption within specs

75. Mr Alessi then continues and expresses the opinions in [12] to [14] without establishing a factual basis for the opinions:

12.    Excluding the cost of air and fuel filters, this exposes the vehicle owner to additional inconvenience and costs for the servicing of the subject Vehicle.

13.    Considering the rate of oil rise, the vehicle owner could not drive to Northern Australia without having to endure the inconvenience and cost; and be expected to service the subject vehicle prior to reaching his destination, and the same would apply on the trip returning home.

14.    Based on oil changes alone, the vehicle owner will face a cost of $6000 for oil changes over the next 10 years if they choose to keep the subject vehicle, which is $3000 more than they would spend if the rising oil problem did not exist. This does not include the addition expense already endured because of the problem. No one should be subjected to such needless cost and inconvenience to service a relatively new vehicle.

76. At [15] Mr Alessi opines for a shortened engine life expectancy and additional expense for the Applicants, again without identifying any facts on which his opinion is based:

15.    Needless to say, excessive diesel within the oil system has the ability to deteriorate the lubricating properties of engine oil, which will shorten the life expectancy of the internal components of the engine, which would again expose the vehicle owner to added expense.

77. (emphasis added)

78. but does not say anything stronger than the diesel “has the ability” and does not say that this incident has happened to the diesel engine of the Applicants’ Car.

79. Mr Alessi continues his discussion and at [16] to [19] refers to the likely cause of excessive oil rise being the injectors and fuel pump, though he concedes that the fuel pump was not tested by AD Diesel:

AG DIESEL REPORT

16.    Mazda Australia removed and sublet the injectors from the Subject Vehicle to AG Diesel Pumps and Injectors in Victoria for testing.

17.    The report provided by AG Diesel states that the fuel injectors were statically tested, but there is no reference to leak testing anywhere within the report.

18.    Due to the on car tests conducted (as noted within our report of 7 April 2015), leak down of diesel from the injectors and fuel pump was evident and may have been a likely cause of the excessive oil rise within the subject vehicle.

19.    Within our tests as per report (7 April 2015), our diagnostic tests suggest that there was a high probability that the diesel fuel pump was a partial cause. However, the AG report does not make mention of any fuel pump testing whatsoever.

80. The conclusions of the second Alessi Report are set out at [20] to [25] as discussed in the following paragraphs. The opinion at [21] is gratuitous and unhelpful as it does not critique the Mazda test in any meaningful way by identifying a different or better methodology and what may be better equipment:

CONCLUSION

20.    As instructed we have reviewed the information provided by Mr Fischer from Mazda Australia to provide expert comment on the material.

21.    It would appear that Mazda have tried to conduct a fuel economy test using very inaccurate methods to achieve a mediocre outcome. There are accurate devices to conduct fuel economy tests; so I believe Mazda should invest in the correct equipment so they may provide accurate information.

22.    Mazda Australia sublet fuel injectors to AG Diesel Pumps and Injectors in Victoria for testing. However; the testing does not appear to have included the high pressure fuel pump, and the tests on the fuel injectors have been limited and inconclusive.

81. The critique in [22] refers to the absence of testing of the high pressure fuel pump and the inadequacy of the fuel injector tests. But having been informed of these matters, the Applicants have not conducted their own tests and these matters remain unproven. As the Applicants have the onus of proving their case and have not done so, the Alessi critique of the Mazda tests does not have the effect of proving the Applicants’ case.

82. The Alessi Second report continues but the opinions in [23] and [24] are not measurable in respect of “unacceptable, inconvenient and extremely costly” as there is no point for comparison in the Second report. The opinions in [24] and [25] are without any factual basis and speculative:

23.   The rising oil level within the Subject Vehicle is unacceptable, inconvenient and extremely costly especially as the vehicle was purchased to reduce outgoing expenses on motor vehicles.

24.    Our concern with excessive engine oil incrimination due to the ingress of diesel into the oil system is the increased risk of engine oil dilution and the likelihood or high probability of premature DPF and engine failure is eminent (sic) if same continues to occur.

25.    After careful inspection, testing and evaluation of the Subject Vehicle which is detailed within our report of 7 April 2015 and the review of the Mazda Australia documentation, we advise that the faults in regards to excessive oil incrimination; and high fuel consumption, will need addressing to eliminate the risk of premature failure of the components and the engine.

83. Mr Bradford, who is a Senior Manager, Technical and Warranty of the first respondent Mazda, conducted investigations of the Car engine operation as agreed was appropriate by Mr Alessi as a result of the joint witness ‘hot tub’ session on the first day of the hearing 7 September 2016, and provided his report contained in the “Operating Testing Parameter Document” dated 16 November 2016 (the Bradford Report) on whether or not the engine was operating to the manufacturer’s specifications; see exhibit 1.

84. Mr Bradford does not refer to or adopt the Tribunal’s Guidelines on expert witnesses and he is a Mazda employee, however, the matters in his report are factual. There was a challenge by Mr Alessi to the veracity of the tests and results in the Bradford Report which are discussed later. Nevertheless I admitted Mr Bradford’s evidence and the Bradford Report into evidence as I was satisfied that he had knowledge of the matters about which he gave evidence. As I have said earlier, the rules of evidence concerning an expert report do not apply in Tribunal proceedings, and his evidence was to be weighed in respect of facts set out, and opinions expressed based on those facts. In addition, the testing was carried out as a result of the directions given for Mr Alessi and Mr Bradford to design a test protocol.

85. A number of preliminary matters are set out in the Bradford Report at p3 and include at [2.b.] the following statement:

oil dilution occurs as part of the normal operation on the Mazda 3 Diesel engine. The vehicle is designed to operate with an oil dilution percentage of 21% (ie, volume of diesel in engine oil taken as a percentage of total oil volume).

86. The Bradford Report at [2.e.] p4 sets out the agreed test parameters, relevantly including:

(iii)   In regards to the oil dilution test, where the vehicle is serviced within the recommended servicing intervals, oil level anywhere between the ‘F’ and ‘X’ mark is considered normal.

For the purposes of this test, it is expected that the rate of oil dilution will not exceed 130ml per 1,000 kms.

(iv)   Based on the Green Vehicle Guise estimate of fuel consumption of 5.6 litres/100km and riving style of the Applicant (as agreed by Mr Shane Bradford and Mr Renzo Alessi), the acceptable fuel consumption range for the purposes of the below tests will be between 6.5 – 7 litres/100km.

(v)   In regards to the fuel consumption test, the driver shall record the Average Speed travelled. The following parameters will be used to determine driving conditions:

i.   Average Speed greater than 80 km/hour – Freeway driving

ii.   Average Speed between 30 – 80 km/hour – City driving

iii.    Average Speed up to 20 km/hour – Heavy traffic conditions

(vi)   The Second respondent will keep a log while the vehicle is being driven for the purposes of completion of the below tests.

87. The Bradford Report pp5 to 9, under the heading “3. Tests to be completed” identifies the tests in a table form under the headings: Test; Operating Test Parameters; Parts Required; Records/Documents; and Outcome. The Tribunal had directed the parties to conduct an agreed test regime, but Mr Alessi did not sign his agreement to the above tests, but nor did he propose different tests. This placed Mazda in a difficult position, as it had to choose between conducting tests as it had designed and proposed to Mr Alessi, or conducting no tests. In the absence of Mr Alessi’s agreement, Mazda proceeded to conduct the tests, and the Motor Vehicle Log data is recorded in the Radford Report at pp45 and 46. The tests were conducted between 7 October 2016 to 20 October 2016 over about 1,000kms from a starting odometer reading of 80,379 to a final reading of 81,380. The average speeds varied from an average of 40 kph to 63kph, and the average fuel consumption varied from 5.1 L/100kms to 6.2 L/100kms.

88. The average speeds are in the definition of “City Driving” of between 30 to 80 kph and the fuel consumption results are within the Mazda defined acceptable range of between 5.7 and 7 L/100kms.

89. The Bradford Report at p52 sets out conclusions as follows:

1.   Oil Dilution

Based on the tests completed, the rate of oil dilution is within manufacturer’s specifications.

As can be seen from the photo of the dipstick taken on 21/10/16 after the vehicle had travelled 1000km, the oil level has not risen much above the ‘F’ mark. The photo of the volume of oil drained from the engine on 21/10/2106 also indicates an engine oil level increase of approximately 100 ml which is well within manufacturer’s specifications.

The ALS Tribology test for Sample 2 (taken after the vehicle was driven 1000km after an oil change) also indicates the presence of fuel in the oil at 1% which is well within manufacturer’s specifications for a vehicle which has been driven for 1000km after an oil change. ALS diagnosis determined that fuel dilution was satisfactory.

2.   Fuel Consumption

Based on the tests completed, the vehicle fuel consumption was determined to be 5.562 litres/100km.

This is well within the Green Guide Vehicle estimate of 5.7 litres/100km and well below the agreement between the parties that the acceptable range of fuel consumption for the vehicle taking into account the driving style of the Applicant would be between 6.5 – 7 litres/100km.

90. The Applicants criticised the test parameters in the Bradford Report, but they did not identify alternative testing parameters, and more relevantly, did not conduct alternative testing and provide any different results.

91. By a further report of 17 November 2016 (the Allesi Third Report): exhibit D; Mr Alessi provides a review or perhaps better described as a critique of the Bradford Report. Mr Alessi makes a number of serious allegations tantamount to alleging fraud, for example, that the mileage and distance data are “fictitious”: paragraphs [7] and [27]:

Mazda allegedly compiled a log of the distance travelled, mileages and fuel usage, but the data recorded for a number of the routes are fictitious. Average speeds for many of the trips are not only wrong, but impossible unless the trip was conducted at times of no traffic or traffic light. Photographs were not taken to record the odometer with times and dates within the testing parameter document.

92. which is a most serious allegation, only to be made when there is clear evidence of the matter alleged, such as where the Applicants had conducted their own tests which should very different results. Fraud involves an intentional dishonest act (or omission) done with the purpose of deceiving. There is no evidence to support Mr Alessi’s allegation, for example, to show by objective evidence that the distances are incorrect, or that the speeds cannot be achieved. These allegations must be rejected.

93. In addition, Mr Alessi states at exhibit D [33]: “The tests that I conducted using products specified by Mazda and using an independent testing facility prove Mazda’s assertions about oil dilution to be incorrect and possibly bias in protecting their brand.” Mr Alessi does not identify the factual bases on which these allegations are made. They must be rejected.

94. In conclusion, I accept the test procedures, test results and conclusions in the Bradford Report which supports the respondents’ position. I find that there is no expert evidence to contradict the Bradford Report or to support the Applicants’ claims.

Issues remitted

95. When proceedings are remitted for re-hearing the matter proceeds as if it has not been heard before, referred to as a hearing de novo.

The hearing disadvantage

96. Mr Fischer uses two hearing aids and was concerned that he may have been disadvantaged if he was unable to hear what was being said during the hearing.

97. Mr Fischer encountered some hearing difficulty on 7 September 2015 and 21 November 2016. The hearing loop in the hearing room was available but was not ideal. I had asked Mr Fischer to advise if he was encountering hearing difficulties at any stage of the hearing, and I am satisfied that no persistent problem occurred and Mr Fischer was able to fully participate in the hearing. On 21 February 2017 the Tribunal hearing occurred at the Tribunal’s new hearing rooms and the sound quality during the hearing was of a better quality. Mr Fischer confirmed that he encountered no hearing difficulty on the last day.

98. I am satisfied that Mr Fischer fully participated in all stages of the hearing: he gave evidence in chief; objected to the respondents’ documentary evidence; cross-examined the respondents’ witnesses; and made oral submissions.

The law

Onus of proof

99. The Applicants carry the onus of proving the matters they allege.

100. There are two matters to be proved: Firstly, that the respondents have breached their contractual and statutory obligations; and second, that the Applicants have suffered a loss thereby.

Liability

101. As the Appeal Panel states at [24], the obligation of the Tribunal where parties are not legally represented is to look at the evidence generally and determine whether or not there is any legal basis raised which comes within jurisdiction: Aceti v Burhan Pty Ltd [2015] NSWCATAP 55 at [30]. This requires the Tribunal to do its best to identify the causes of action. Adopting that approach, the Applicants’ causes of action arising on the material facts are discussed in the following paragraphs. In general terms the Applicants’ rights arise in contract and statute law.

Contractual obligations

102. The Respondents’ had obligations to the Applicants under the law of contract, but as these came to an end on 14 December 2013 when the new car warranty expired, I do not discuss them further.

Statutory obligations

103. I do not have a copy of the reasons of Member Holles and am unaware of his discussion on the relevant law, other than that the Appeal Panel at [24] states that the decision considered only MDARA and no consideration was given to provisions of the ACL or TPA, whichever applied.

104. With respect to the Appeal Panel, ACL does not apply as the supply of the Car occurred before ACL commenced on 1 January 2011.

103. TPA does not apply as it is a Commonwealth law, as explained earlier. The FTA mirrors the TPA sections, which are identified herein only as a cross reference.

104. With respect to Member Holles and the Appeal Panel, MDARA did not commence until 1 December 2014 and repealed the Motor Dealers Act 1974 (MDA) in effect until that date. It is not necessary to consider the operation of the MDA as there are no provisions which provide an alternative cause of action to FTA, and CCA was at that time, for the purposes of this matter, relevantly concerned with the jurisdiction of the Tribunal and powers of the Tribunal to make orders: see CCA ss 8, 13 and 14.

105. There are two respondents who have different statutory responsibilities: AMR as the seller (supplier) and service provider; and Mazda as the importer and deemed manufacturer.

106. The Applicants’ claim is against Mazda as the importer and deemed manufacturer of the Car as explained later, and similar obligations, under different section numbers, are owed by AMR which supplied the Car to the Applicants.

107. The applicants’ cause of action is found in the FTA as in force 15/12/10 being the date of supply of the Car to the Applicants. The relevant provisions are discussed in the following paragraphs.

108. FTA s 4 (Definitions) (1) refers to the Applicants having “acquired” the Car by purchase. The respondents carry of a “business”. The Applicants are each a “consumer” as defined in FTA ss 5 and 81, who acquired the Car which is within the definition of “goods”, and the amount they paid was the “price”. Both the respondents were each a "supplier" and there was a "supply" by way of sale. Similar provisions are found in CCA ss 3 and 4, but nothing is added by repeating the CCA provisions.

Time for filing an Application

111. The starting point is whether or not the Applicants have commenced their claim within time. The respondents contend that they have not and if the claim was filed out of time, that is a complete answer to the claim.

112. In respect of Mazda this issue is determined by FTA s 40ZB (Time for commencing actions), which mirrors TPA s74J, and required the Applicants to file their claim within three years of their cause of action arising which commenced either on the day of the contract for sale with AMR, or within three years of the Applicants becoming aware, or when they ought reasonably to have become aware that the Car was not reasonably fit for the purpose referred to in FTA s 40Q (Implied undertakings as to quality or fitness) in the claim against AMR; or was not fit for purpose under s 40U (Actions in respect of unsuitable goods), and not of merchantable quality under s 40W (Actions in respect of goods of unmerchantable quality) for the claim against Mazda.

113. The Applicants’ remedy under FTA s68 is in damages and a claim can be brought within six years in a Court: s68 (2); but must be brought in this Tribunal within three years of the cause of action arising: CCA s7(4)(a). However, for the reasons set out in the following paragraphs the Applicants’ cause of action is against Mazda which is required to indemnify AMR.

114. In respect of Mazda as the deemed manufacturer, FTA s 40ZB provides as follows:

(1) This section does not apply to a cause of action to which Division 6 of Part 2 of the Limitation Act 1969 applies.

(2) An action under a provision of this Division may be commenced at any time within 3 years after the day on which the cause of action accrued.

(3) For the purposes of this section, a cause of action is taken to have accrued:

(a) in the case of an action other than an action under section 40ZA, on the day on which the consumer or a person who acquired the goods from, or derived title to the goods through or under, the consumer first became aware, or ought reasonably to have become aware:

(i) in the case of an action under section 40U—that the goods were not reasonably fit for the purpose referred to in that section, or

(ii) …

(iii) in the case of an action under section 40W—that the goods were not of merchantable quality, or

…

(4) In an action under a provision of this Division, it is a defence if the defendant proves that the action was not commenced within 10 years after the time of the first supply to a consumer of the goods to which the action relates.

115. The long stop 10 year limitation in FTA s 40ZB (4) does not arise.

116. Under FTA s 40ZB the Applicants were required to file their application against Mazda within three years of one or other of the two defined events: commencing the day on which the Car was supplied by AMR, which expired on 15 December 2013; or relevantly in this matter, on the later date on which the Applicants “first became aware, or ought reasonably to have become aware” that the Car was not reasonably fit for purpose or of merchantable quality.

117. The Applicants first raised the question of fuel consumption with AMR on 1 July 2011 in the context of whether or not the fuel consumption display was accurate, but what they were told is not in evidence. I am unable to determine whether or not they were then aware or ought reasonably to have become aware of the fuel consumption issue.

118. However, this issue can be resolved as on 20 April 2012 the Applicants took the Car to John Newell concerning excessive fuel consumption of 5.7 L per 100km. This is the first date showing they became aware of the fuel consumption issue which led them to the issue of the diesel engine management system and Regeneration. I find that this was the relevant date for calculating the three years. On this basis, their Application filed on 15 February 2015 was within three years.

Which respondent can be liable?

119. The respondents are Mazda and AMR. Each has a potential liability: AMR as the motor dealer who made an agreement to supply the Car to the Applicants; and Mazda as the manufacture and importer of the Car.

120. The issues in dispute concern whether or not the Car was reasonably fit for use as a motor vehicle, and of merchantable quality.

AMR – the contracting supplier

121. In relation to AMR, the relevant obligation arises under FTA s 40Q (Implied undertakings as to quality or fitness), which is the same as TPA s71, and by s 40Q(1) relevantly provides that the Car is to be of merchantable quality and by s 40Q(2) reasonably fit for any particular purpose for use as a Car:

(1) If a person supplies (otherwise than by way of sale by auction) goods to a consumer in the course of a business, there is an implied condition that the goods supplied under the contract for the supply of the goods are of merchantable quality, except that there is no such condition by reason only of this section:

(a) as regards defects specifically drawn to the consumer’s attention before the contract is made, or

(b) if the consumer examines the goods before the contract is made—as regards any defect that the examination ought to have revealed.

(2) If a person ("the supplier") supplies (otherwise than by way of sale by auction) goods to a consumer in the course of a business and the consumer, expressly or by implication, makes known:

(a) to the supplier, or

(b) to the person by whom any negotiations are conducted,

any particular purpose for which the goods are being acquired, there is an implied condition that the goods supplied under the contract for the supply of the goods are reasonably fit for that purpose, whether or not that purpose is one for which such goods are commonly supplied, except where the circumstances show that the consumer does not rely, or that it is unreasonable for the consumer to rely, on the skill or judgment of the supplier or the person conducting the negotiations.

(3) …

122. The statutory obligations of fit for purpose and merchantable quality are also obligations owed by Mazda. The consequence is that if AMR is liable to the Applicants for the Car, Mazda is liable to indemnify AMR: FTA s 40ZA(b), so that the principal obligation to the Applicants lies with Mazda. For this reason, these reasons will discuss Mazda’s obligations (concerning fit for purpose and merchantable quality) to the Applicants, as the Applicants will get no better outcome against AMR than Mazda, and cannot on the material facts in this matter, succeed against AMR if they cannot succeed against Mazda.

Mazda – the importer and deemed manufacturer

123. There was no evidence about whether or not Mazda “manufactured” the Car in Australia. I infer that it did not as Mazda is incorporated as an Australian company, and is a separate legal entity from its parent company in Japan. I find that Mazda did not manufacture the Car in Australia, but was the importer and deemed “manufacturer”. As the deemed manufacturer, Mazda is liable on the Applicants’ action if the Car is not fit for purpose or is not of merchantable quality. There was no evidence and the respondents did not contend that the allegations of not fit for purpose and not of merchantable quality were incidents which occurred after the Car left Mazda’s control, and as a result of the Applicants’ abuse or misuse of the Car, or as a result of some other independent incident: eg see FTA s 40W(2) set out below.

124. Mazda is the importer, and by FTA s 40T (Interpretation) which was the same as TPA s 74A, is responsible as if it was the manufacturer as defined in s 40T(1), and relevantly s 40T(4) provides:

(4) If:

(a) goods are imported into this State by a person who was not the manufacturer of the goods, and

(b) at the time of the importation the manufacturer of the goods does not have a place of business in this State,

the person is, for the purposes of this Division, taken to have manufactured the goods.

125. Where Mazda is the deemed manufacturer by FTA s 40T, it is responsible for the Car sold and supplied by AMR to the Applicants: TPA s 40ZA (Right to recover against manufacturer or importer), see also TPA s 74H, which provides:

If:

(a) a person ("the seller" ) is under a liability to another person ( "the consumer" ) in respect of loss or damage suffered by the consumer as a result of a breach of a condition or warranty implied by a provision of Division 4 in a contract for the supply of goods by the seller to the consumer, and

(b) a third person ( "the manufacturer" ) is liable to compensate the consumer in respect of the same loss or damage by reason of a provision of this Division,

the manufacturer is liable to indemnify the seller in respect of the liability of the seller to the consumer and the seller may, in respect of the manufacturer’s liability to indemnify the seller, institute an action against the manufacturer in a court of competent jurisdiction for such legal or equitable relief as the seller could have obtained if the liability of the manufacturer to indemnify the seller had arisen under a contract of indemnity made between the manufacturer and the seller.

126. The obligations of Mazda as the deemed manufacturer was explained in Courtney v Medtel Pty Ltd [2003] FCA 36 at [181] and [182] in the context of the TPA provisions, and is equally applicable to the FTA provisions:

181. Sections 74B and 74D form part of Div 2A of Part V of the TP Act. Division 2A, which is headed "Actions against manufacturers and importers of goods" was introduced into the TP Act by the Trade Practices Amendment Act 1978 (Cth). The amending legislation was designed to implement a recommendation made by the Swanson committee that the TP Act should impose liability on the manufacturer or importer of goods to a "consumer buyer" for breach, inter alia, of any implied warranties essentially of the same kind as those already implied by the TP Act into contracts between a seller and a consumer buyer: Trade Practices Act Review Committee, Report to Minister for Business and Consumer Affairs (August 1976), par 9.127; Cth Parl Deb, HR, 13 April 1978, at 1507 (Minister for Business and Consumer Affairs). Then, as now, the TP Act provided for non-excludable warranties of merchantable quality and fitness for purpose in contracts for the supply of goods to consumers: TP Act, ss 68, 71.

182. Neither s 74B nor s 74D operates on a contract. Nor do those sections, unlike earlier State and Territory legislation which imposed liability on manufacturers or distributors of consumer goods (Manufacturers Warranties Act 1974 (SA); Law Reform (Manufacturers Warranties) Ordinance 1975 (ACT)), create a fictional contract between the manufacturer or distributor and the consumer: G M Gregg and T D Tzovaras, "The Liability of Manufacturers and Importers under the Trade Practices Amendment Act 1978" (1979) 10 Fed LR 398, at 403. Rather the sections create statutory causes of action that are available where a corporation places goods in the chain of distribution and the goods are not of merchantable quality or are not reasonably fit for the particular purpose that was made known to the corporation: Rasell v Cavalier Marketing (Australia) Pty Ltd [1991] 2 Qd R 323, at 344, per Cooper J.

127. The effect of FTA s 40ZA is that an importer and deemed manufacturer such as Mazda is liable to compensate the Applicants: s 40ZA(b) and indemnify AMR for any liability it may have to the Applicants. This means that Mazda becomes responsible to the Applicants for any loss or damage they may have suffered, and AMR has a right to claim against Mazda. By this provision, AMR has the same rights against Mazda as if it is a consumer. AMR did not bring a cross application against Mazda in the Tribunal and there is nothing further for the Tribunal to consider in this respect.

128. Mazda also has an obligation under FTA s 40W (Actions in respect of goods of unmerchantable quality), see TPA s 74D, to compensate the Applicants for any loss or damage as it is the deemed manufacturer of the Car which has been sold and supplied, through AMR, to the Applicants:

(1) If:

(a) a person ("the supplier"), in trade or commerce, supplies goods manufactured by the supplier to another person who acquires the goods for re-supply, and

(b) a person (whether or not the person who acquired the goods from the supplier) supplies the goods (otherwise than by way of sale by auction) to a consumer, and

(c) the goods are not of merchantable quality, and

(d) the consumer or a person who acquires the goods from, or derives title to the goods through or under, the consumer suffers loss or damage by reason that the goods are not of merchantable quality,

the supplier is liable to compensate the consumer or that other person for the loss or damage and the consumer or that other person may recover the amount of the compensation by action against the supplier in a court of competent jurisdiction.

(2) Subsection (1) does not apply:

(a) if the goods are not of merchantable quality by reason of:

(i) an act or default of any person (not being the supplier or an employee or agent of the supplier), or

(ii) a cause independent of human control,

occurring after the goods have left the control of the supplier, or

(b) as regards defects specifically drawn to the consumer’s attention before the making of the contract for the supply of the goods to the consumer, or

(c) if the consumer examines the goods before that contract is made, as regards defects that the examination ought to reveal.

(3) For the purposes of this section, goods of any kind are of "merchantable quality" if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to:

(a) any description applied to the goods by the supplier, and

(b) the price received by the supplier for the goods (if relevant), and

(c) all the other relevant circumstances.

129. FTA s 40W(2) provides a defence for Mazda if the cause of the loss of merchantable quality arises from an act or default of the Applicants or any of the other events in s 40W(2)(a), (b) and (c). The material facts do not show that any of these matters apply.

Determination of the disputes

130. At the centre of this dispute is whether or not the Car was of “merchantable quality” as defined in FTA s 40W(3)(a), (b) and (c) which incorporates the test of the Car being fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect, and lists the matters to be considered in (a), (b) and (c).

131. The material facts show that the Car is reasonably fit to drive and operate as a Car being a purpose for which a car is commonly bought. There was no evidence to the contrary. The description and price paid are not in dispute.

132. The remaining element is in (c) concerning all other relevant circumstances, and the issue in dispute is whether or not the diesel engine management system used by Mazda consisting of a DPF, which operates by adding diesel to the oil (with an increased level in the sump shown by the dip stick), and the fuel use surges during the Regeneration, are by themselves or collectively, evidence that the Car is not fit for the purpose for which a car is commonly bought.

133. The Applicants contend that the design of the diesel engine management system with Regeneration will lead to premature engine failure. There is no evidence to support this contention. The engine has not been stripped down to measure the wear to date, and there is no expert report showing that engine wear to date is greater than the engine wear that would occur if a different diesel engine management system was used.

134. Regeneration, fuel surge and the oil and diesel mix were all designed features of the engine and there was no evidence that the engine operation involving these features was other than within the manufacturer’s specification. There was no evidence of any fault with the engine or its operation. Whether or not these features were mentioned before the Applicants’ purchase or in the owner’s manual is not to the point. This is a common feature in Mazda diesel engines, it is a technical issue and as such there is no reason why it would be mentioned to the Applicants before the sale of the Car or in the owner’s manual. It was not alleged, and there was no evidence that there was anything unusual about the diesel engine or its operation and management that required notice to be given to the Applicants for the purpose of them making an informed choice.

135. The Applicants complained they were not informed about the Regeneration process and related engine operations before they made the agreement to purchase the Car, but they did not allege that this omission was conduct that was or was likely to be misleading or deceptive conduct under FTA s42 (then in effect). Even if they had made this allegation, silence by Mazda and AMR about the engine design features including Regeneration, oil and diesel mix, and fuel surges during Regeneration would not have been misleading and deceptive as there was no evidence that these features were unusual for a diesel engine design, so as to be outside consumer expectations in the sense that Mazda and AMR had an obligation to draw them to the attention of the Applicants.

Regeneration and fuel consumption

136. The Applicants complain that Regeneration results in increased fuel consumption. Mr Fischer provided an example, and also contends that because there is no indication of the Regeneration occurring, if the engine is turned off during the Regeneration cycle, it is later reactivated but takes longer to complete Regeneration, and uses additional fuel.

137. The evidence is that Regeneration is an acceptable method of diesel engine management, and although the fuel consumption increases during Regeneration, this is a designed feature of the Regeneration process and is temporary and minor. The example given by Mr Fischer over 70 kms shows a temporary increase as a result of the process and there is nothing which suggests that this higher fuel consumption continues for an extended period. The controlled fuel testing done by Mazda identifies the fuel consumption, which does not reach the level discussed by Mr Fischer’s example. There was no evidence to show that there is an alternative solution which complies with legislative requirements for managing diesel engine particulates emitted into the environment. There was no evidence that Regeneration was unusual, experimental or unknown in the community so as to make the car unfit for purpose, or not of merchantable quality.

136. The Applicants further allege that if Regeneration is a normal process, they are disadvantaged because of: frequent oil level checks which are a lengthy process; more frequent oil changes compared to a different system, which costs about $200 each time; Oil changes are not synchronised with the servicing schedule; Diesel mixing with the oil will mask an oil leak; the dipstick measure shows an increase in volume in the sump over time, but the owner’s manual does not explain this incident. These matters are, on the balance of probabilities, related to variations in driving conditions rather than a defect in the engine operation, and as such, do not prove a cause of action against the respondents. The evidence does not support a finding that there was a fault or defect in this car which required rectification or repair. There was no evidence that there was anything unusual about this Car and its engine compared to other cars using the same engine and engine management system. Relevantly, the Applicants have not made out their case that the Car was not fit for purpose or not of merchantable quality. There was no evidence that the diesel engine of this Car required rectification,repair or replacement.

137. Mr Fischer contends that in respect of Regeneration, Mazda have “done their best to hide that it occurs”. The Applicants point to the absence of any mention of this process in the owner’s manual. However, there was no evidence that Regeneration was “hidden” from the Applicants so as to create liability for the Respondents for misleading and deceptive conduct, or a false representation, or at all. There was no reason for Mazda to refer to the technical aspects of Regeneration in the owner’s manual as these are technical issues for servicing, and in any case there was no evidence that Regeneration was an unusual process which requires Mazda to draw this aspect of engine management to the attention of consumers generally, and to the Applicants in particular.

Distance travelled

140. Whether or not the Applicants travelled short or long distances was not in issue when the matter came before me. In any case, fuel consumption was tested by Mazda and the evidence was that it was in an acceptable range for driving conditions during the test period. The Applicants had the onus of proving any relationship between the distance of their driving trips and the amount of diesel in the oil, accumulation of diesel particles in the DPF, or frequency of Regeneration. They have not done so.

DFP Warning light

141. The Applicants were concerned that the DPF warning light was defective with a consequence that they would not know if the engine management system was functioning leaving the possibility of damage to the engine. The Applicants had the burden of proving the DPF warning light was defective, and they produced no evidence of a fault or defect.

Fuel consumption

142. The fuel economy figures published by the Fuel Guide have not been achieved by the Applicants. As the Fuel Guide carefully states, the fuel economy figure is a standard test procedure to provide a common basis for comparison of individual vehicle models; actual on-road consumption depends on a range of identified factors; and no test can simulate all ‘real world’ conditions. In any case, the Car’s fuel consumption is not so dissimilar to the Fuel Guide so as to base an allegation that the Car is not fit for purpose or not of merchantable quality. Nor does the difference support the Applciants’ contentions for misleading or deceptive conduct or false representation by Mazda or AMR.

Engine wear

143. The Applicants contend that Diesel in the oil increases wear in the engine components, and eventually leading to catastrophic engine failure. There was no evidence to support the allegations of increased wear or eventual catastrophic engine failure. The engine had not been stripped down or any wear measured to prove wear was greater than should occur in a diesel engine with the same operating period.

Costs

144. The Applicants applied for the cost of their expert and his reports as an out-of-pocket expense: see CATA s60. They have been unsuccessful and are not entitled to recover those expenses from the Respondents. The Respondents informed the Tribunal that they did not wish to seek an order that the Applicants pay their out-of–pocket expenses, and no order is to be made.

Conclusion

145. The Applicants have failed to prove that the Car is not reasonably fit for a particular purpose or is not of merchantable quality, or that Mazda or AMR engaged in misleading or deceptive conduct or made any false representations whether by act or omission. They have failed to prove any loss or damage suffered as a consequence of the alleged breach by Mazda or AMR of their contractual or statutory duty. There is nothing to rectify or repair in the Car’s engine or engine management system. The Applicants are not entitled to a refund of the purchase price of the Car. The claims fail and must be dismissed.

146. The Order is made in the interests of justice as between the parties to determine their dispute.

J Levingston

General Member

Civil and Administrative Tribunal of NSW

22 March 2017

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Decision last updated: 11 May 2017